Economic strategies in Cuba: An incentive for foreign investment

Cuba received the year 2021 with the implementation of the monetary restructuring policy that, in practice, means the elimination of the dual currency system and other measures deemed essential for the advance of the country’s economic and social strategy.

As of the so-called “day zero,” on January 1st, Cuba implemented a single currency, the Cuban peso, at an exchange rate of 24 pesos (CUP) to 1 USD, and the Cuban convertible peso (CUC), until then equivalent to one USD and adopted during the 1990s, was definitely eliminated.

Previously, in July 2020, authorities presented the policy authorizing the import and export activities of private enterprises, which provides these facilities through foreign trade services and specialized companies.

To date, there are 41 specialized entities approved for this activity and the strategy implies that the exporter receives most of the benefits: 80 percent of the income in foreign currency, while the remaining 20 percent is delivered in national currency.

State institutions evaluate the exportable quality of the product, the possibilities of penetrating the market and the access channels. At the end of last year, 621 non-state run enterprises had export potential, mainly in the food and agriculture sector, goods and services.

At the same time, foreign investment is one of the economic priorities of the Caribbean nation, especially during the current crisis aggravated by the COVID-19 pandemic and the increased sanctions imposed by the U.S. administration of Donald Trump.  

The newly established exchange rate is expected to stimulate exports. From the end of last year, companies with foreign capital adopted particular indicators to maintain profit levels and their profitability margin, during the formation of the new wholesale prices.

More than 700 entities, suppliers of products and services for Cuba and other buyers of exports, currently operate in CUP in the national territory, although they maintain their accounts in freely convertible currency for operations related to foreign trade and transfers, among other services. 

In addition, the new Portfolio of Foreign Investment Opportunities was recently presented with 503 projects, 43 more than the previous year, and an estimated investment value of 12.07 billion dollars.

The business opportunities included will have investment amounts with a marked export nature, will contribute to local development and, as far as possible, incorporate technologies that contribute to the use of renewable energy sources.

Similarly, Cuba eliminated the obligation of majority State participation in sectors such as tourism, biotechnology and wholesale trade, a requirement that remains only for the extraction of natural resources and the provision of public services.

The updated version of the Portfolio includes commercial activities in the 15 provinces of the island, and the Isle of Youth Special Municipality, with the greatest number of proposals in sectors such as tourism with 131, energy with 129 and food production with 98.

The year 2020 concluded with 29 foreign investment projects with a committed amount of more than 2.4 billion dollars, and today there are more than 30 projects in an advanced stage of negotiation, representing investment of more than 3 billion dollars, pending approval this year.

Five of the consolidated plans, as well as more than 50 businesses, correspond to the Mariel Special Development Zone, located in the western province of Artemisa. Since its opening in 2013, the Zone has accumulated results such as the generation of 11,000 jobs.

Within the policy of monetary restructuring, the Zone is one of the sources for financing in foreign currency for state companies, and investments for a value of 675 million dollars are projected.